THE LOGISTICS OPERATORS INDUSTRY IN BRAZIL: AN ANALYSIS OF THE MAIN OPERATORS

The logistics operators industry in Brazil is quite recent. It can even be said that this is a phenomenon that began to gain momentum only in 1994, after the economic stabilization provided by the real plan. The growth has been due both to the emergence of genuinely national operators and to the entry into the country of some of the most important and well-known global providers.

As in any nascent industry, the sector presents problems and opportunities. The opportunities have to do with the enormous potential of the Brazilian market, a consequence of the privatization of the transport infrastructure, and the growing adoption of the concept of integrated logistics and Supply Chain Management by the largest companies in the country. The problems derive from the poor quality of the physical infrastructure, the inadequacy of the regalory apparatus, the generalized lack of standards, the little knowledge that one has of the industry, and the consequent difficulty of the contracting companies to identify and select the operators most adequate to their real needs. .

In the specific case of hiring logistics operators, this difficulty becomes even more acute due to the numerous alternatives for action, including dimensions such as: types of services offered; geographical scope of action; types of industry served; characteristics of the assets used; and source activity.

In a previous article, Fleury and Ribeiro (2001) sought to characterize logistics service providers – PSLs, based on the international literature. Issues such as different denominations of PSLs, performance formats, segmentation dimensions, and problems and opportunities for the development of the industry were addressed. This work continues the previous article, seeking to characterize the main logistics operators operating in Brazil, based on field research that sought to compare them with the standards described in the international literature.

In order to structure the work, the field research was organized around a main question, divided into four operational questions. The main question reflects the general objective of the research, that is: How is the logistics operators industry characterized in Brazil? Operational questions drill down to the main question, as indicated below:

– What are the general characteristics of the companies surveyed?

– What services are offered and which customers are served?

– What is the existing infrastructure in the companies?

– What are the main barriers and opportunities for the development of the industry in Brazil?

In order to answer these questions, executives belonging to 8 different companies were personally interviewed, selected from a convenience sample, involving the largest and best known logistics operators in Brazil. A semi-structured interview script, based on the international literature review, was developed and used during the interviews. Considering the method used, the results of this research cannot be generalized to the industry as a whole, allowing however to make some propositions that may serve as a guide for broader research, whose samples are representative of the industry as a whole.

GENERAL CHARACTERISTICS OF THE INTERVIEWED COMPANIES

The companies surveyed have relatively little experience as logistics operators in Brazil, as can be seen in Figure 1 below.

The average operating time in the country is just five and a half years, with the oldest being on the market for 13 years, and the newest just 2 years. This fact was to be expected, given that the phenomenon of logistics operators is relatively recent in Brazil. It appears, however, that, for the most part, these companies already had extensive experience as providers of specialized logistics services, or even as operators in their countries of origin. Of the 8 organizations surveyed, 4 originated from storage companies, 3 from transport companies, and one from an express delivery company (courier). As for the country of origin, 5 are typically national companies, and 3 had their origin abroad.

The average revenue of the companies was R$ 50 million in 1999, but there are significant differences between them, as can be seen in figure 2 below. 120 million in the same year. These data, however, deserve correction, because while some companies have an independent “logistics operator” division, with separate accounting from the original company, others combine the new activities with the old activities of specialized logistics service providers. Just as an example, it is worth mentioning that one of the companies surveyed, which in 1,0 earned only R$ 1999 million as a logistics operator in the country, is one of the largest courier companies in the world, with a strong presence in Brazil, and the revenue of R$ 1,0 million does not include courier activities. On the other hand, another company that had the highest revenue among all 1 surveyed, in the amount of R$ 8 million, has a substantial part of its revenue from road transport operations.

From the point of view of geographic scope, all companies surveyed claim to have a nationwide operation, and 4 have international operations. This international performance is due to the fact that 3 of the 4 companies are subsidiaries of large international companies, with only one having national origin.

SERVICES OFFERED AND CUSTOMERS SERVED

The first feature that draws attention in relation to services is the variety of offers provided by companies. All, without exception, offer a minimum of 7 different types of services, i.e. road transport, air transport, warehousing, integrated logistics, logistics information management, freight control and payment, and documentation (eg issuing invoices). . Furthermore, it appears that 6 out of 8 companies offer 21 different types of services. Despite this wide variety, rail and maritime transport services have very limited offers. Only 2 companies offer rail transport services and 3 offer maritime transport services. This seems to reflect the distortion of the Brazilian transport matrix, which is totally dominated by road transport.

Also noteworthy is the small offer of consulting services aimed at designing logistics solutions for potential customers. Only two companies offer this type of service. This means an opportunity still little explored in Brazil.

Using as a basis the previously proposed definition of logistics operator, that is, companies capable of executing and managing, in an integrated manner, at least transport, storage and inventory control services, it can be stated that, with one exception, all 8 companies are classified as logistics operators.

Although the number of services offered is large, the companies' total revenue is heavily concentrated in a limited number of them. Among the services with the highest participation, transport and storage stand out, mentioned by 7 of the 8 operators as being the most important in terms of contribution to revenue. The third most important service, supply chain management, was mentioned by only 3 operators.

This broad set of services is offered to a limited number of customers. On average, the operators surveyed work with around 32 customers, and this number varies from a minimum of 6 to a maximum of 70. It is interesting to note that the two operators with the lowest number of customers, that is, 6 and 8 customers, respectively , are branches of large international operators. In addition to working with a restricted number of customers, operators execute contracts of relatively limited size. Only one of the 8 companies analyzed has a contract worth more than R$10 million. This seems to be an indicator that customers are contracting only limited parts of the logistics process with a given operator, instead of handing over all or a large part of the operation to an integrated operator.

Even under these conditions, it appears that the negotiation process for closing a given contract is reasonably long, taking an average of 5 months, but it can vary between 3 and 6 months. Asked about the existence of some selectivity criterion in the decision to close a contract with a given client, 7 of the 8 operators indicated their ability to meet the client's needs as the main restrictive criterion. Only one company indicated the value of the contract as a restrictive factor for accepting a new client. Another interesting piece of information regarding the client selection policy concerns the tendency towards specialization in certain industries. Five out of the 8 companies stated that they did not have a specialization policy, while the remaining 3 cited the electro-electronics industries, including computers, consumer goods, automobile, banking, printing and chemistry as specialization focuses. These five industries are, along with the chemical, photographic and wholesale sectors, the ones that most contribute to the billing of logistics operators as a whole, as can be seen in figure 3 below.

When asked if there would be differences in the type of service demanded, according to the geographic region, six of the eight respondents stated that the requirements were the same, regardless of the region. This result is influenced by the fact that the vast majority of customers of the surveyed companies are headquartered in São Paulo, which means that their requirements are extended to the other regions in which they operate. This fact indicates a lack of vision regarding the value of a service segmentation policy. The same result occurred when trying to correlate the client's industry with the type of service provided. The vast majority said there was no type of relationship and those who said there was, were only able to list differentiated services for a few industries. A striking example of the lack of attention to the issue of service segmentation occurs with electronic commerce. Six of the eight companies interviewed serve e-commerce customers. However, the services offered to this channel are the same as those provided to the traditional channel. This is perhaps due to the fact that the share of this segment in the total revenue of operators is still very small, varying between 2% and 4%.

INFRASTRUCTURE AVAILABLE AT OPERATORS

All interviewed companies own or, at least, operate fleets and/or warehouses dedicated to their operations. All also offer dedicated resources to their customers if needed. With regard to the operators' warehouses, there is a strong concentration in the Southeast region, which has 44 warehouses, that is, around 68% of the total. Most of them are located in the state of São Paulo, which alone has 35 warehouses, that is, 54% of the total. This corresponds to an average of 4,4 warehouses per operator. The Northeast region, with 13 warehouses, comes in second, as can be seen in Table 1 below.

As for the operators, all, without exception, have at least 1 warehouse in the Southeast region. With regard to the other regions, three operators have a warehouse in the Northeast region, two in the South region, one in the Midwest region, and one in the North region.

Five of the eight companies interviewed have their own fleet. The number of vehicles, however, varies greatly, from a minimum of 7 vehicles to a maximum of 2.540. Even having their own assets, the surveyed companies make intensive use of third-party subcontracting. All, without exception, outsource some part of their activities. There are several outsourced activities, with road transport, air transport and courier operations being totally or partially outsourced by all 8 operators interviewed. Other outsourced activities are software development, shipping, warehousing, internet applications, rail transport, EDI applications. Road transport, in addition to being one of the few that all companies surveyed, at least in part, outsource, is what invariably has the largest number of approved third parties. This number ranges from 15 to 200.

The answers referring to the use of information technology suggest a high rate of use of WMS in storage, despite the adoption of the bar code still not being so high (it is present in only 5 of the 8 companies surveyed). Online order tracking is already being offered to both e-commerce and traditional channel customers by 6 of the 8 companies analyzed. Responses to the use of EDI indicate that, despite the growth in Internet use, this system is still being widely used. Five of the surveyed companies have it. Systems that support the fleet do not seem to be being adopted on a large scale. Only 3 (three) companies have GPS and/or routing. Figure 4 below indicates the degree of use of different information technologies.

The average number of employees is 716, varying significantly between companies, from a minimum of 250 to a maximum of 3.700. From the point of view of education level, 8,00% have completed primary school, 1% have completed secondary school, 57,2% have completed higher education, and 2% have postgraduate degrees.

Seven of the eight respondents state that management-level professionals are recruited within the sector itself. Only 1 (one) company claimed to recruit from Universities, and also 1 (one) claimed to recruit from consulting firms. In a survey carried out by Lieb (1999) with 25 North American logistics operators, the interviewees stated that they recruit 25% of their personnel from universities and another 25% from the sector itself.

Although 17,5% of the workforce has at least completed higher education, there is a feeling of deficiency in personnel qualification, mainly with regard to the technical and managerial level. This feeling is perhaps associated with a lack of training and knowledge in logistics. More than 70% of the employees (this number varied from 50% to 90% among the companies) have a background in administration or economics. In third place comes engineering with an average of 10.5%, and whose variation is between 10% and 12%.

The existence of training programs is not a general rule among the interviewed operators, a worrying phenomenon due to the young age of the industry and the limitations of qualified personnel it faces. However, those who do not have a training program said they fund occasional courses, always seeking to satisfy the employee's needs.

BARRIERS AND OPPORTUNITIES FOR INDUSTRY DEVELOPMENT

The pressure to improve performance was considered the factor that had the greatest impact on the sector. However, the pressure to reduce prices is very close to the first place, indicating that both are considered equally important. This situation puts operators under strong pressure; reduce costs and improve service level simultaneously. The tendency towards an increase in the number of outsourced services, combined with the growth of e-commerce, indicate a probable growth of the market and a greater appreciation of operators.

Among the barriers mentioned, the high value and complexity of taxes, as well as the poor condition of the country's infrastructure are the biggest concerns of the interviewed companies. Seven of the eight companies mentioned these two aspects as barriers to the development of the sector in the country. The lack of training of the workforce was mentioned by 5 of the 8 interviewees and represents a difficulty in meeting the growing levels of customer demand. Half of the companies surveyed cited customers' lack of understanding of the differences between operators and carriers as one of the industry's problems. This confusion certainly contributes to increased pressure for price reductions. Customers' little knowledge of logistics and demand seasonality were two other barriers mentioned by operators.

Improving IT competence is perceived as the main opportunity for operators to improve performance. This perception is consistent with the investments in systems observed in almost all companies. It seems to be an obvious response to increased service demands and cost savings. It allows expanding services in certain situations, reducing costs and improving services. The establishment of alliances confirms the trend already mentioned in the bibliographic reference and seems to be a natural consequence of the pressure for an increase in the number of services and an increase in the demand for services in the sector.

The establishment of partnerships leads as a growth strategy for the interviewed companies, confirming research presented in the theoretical framework. This seems to be one more consequence of the pressure to increase the number and level of service, together with the need to reduce costs, which ends up inhibiting investment in assets.

The expected growth rate of companies is quite high, ranging from 0% to 100% for the next year. More than half of the executives who responded to the question think they will grow at around 20%. When asked about market opportunities, seven out of eight respondents mentioned e-commerce. Supply chain management (SCM) was cited by two companies.

CONCLUSION

The analysis of the results allows us to make a series of propositions about the characteristics of the logistics operators industry in Brazil.

1. The industry of logistics operators in Brazil is quite young and is made up of national and foreign companies from transport, storage and express delivery activities.
2. There is a large discrepancy between the size of logistics operators in Brazil and abroad.
3. Logistic operators in Brazil offer a wide range of types of services, but few offer rail or maritime transport services.
4. Transport and storage, activities that gave rise to the vast majority of operators, continue to be the services that most contribute to their revenues.
5. Brazilian logistics operators do not seem to pay much attention to service segmentation opportunities, both by region and by customer industry.
6. In the process of hiring logistics operators, the level of service works as a qualifier and the price as a classifier.
7. The Brazilian logistics operators market is dominated by hybrid operators, that is, operators that have assets, but make heavy use of third-party subcontracting
8. Logistics operators are heavily concentrated in the Southeast region of the country, with regard to their logistics assets.
9. Increasing competence in Information Technology is perceived as the greatest opportunity to improve services and reduce costs.
10. Brazilian operators seem not to pay enough attention to the recruitment and training of manpower, especially at the managerial level, despite considering the quality of manpower one of the main barriers to the development of the sector.
11. The need to reduce costs and improve performance is one of the main challenges to be overcome by Brazilian logistics operators.
12. The country's tax system and infrastructure deficiencies are the biggest barriers to the development of logistics operators in Brazil.
13. E-commerce and offering integrated logistics services are seen as the biggest opportunities for logistics operators in the near future.

NOTES

1. As cited in NEW STUDY SAYS 3PL SERVICES KEEP GROWING. Purchasing. June, p.89-90. 1999.

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Authors: Paulo Fleury and Aline Ribeiro